Constellation Brands Analysts Bullish After Q1 Print

Beverage company Constellation Brands, Inc. STZ reported first-quarter results Friday that came in better than expected on the top-and-bottom line and prompted multiple Street analysts to reaffirm bullish stances. 

The Analysts

BMO Capital Markets' Amit Sharma maintained an Outperform rating on Constellation Brands with an unchanged $225 price target.

Jefferies' Kevin Grundy maintained at Buy with a price target lifted from $264 to $274.

Bank of America Merrill Lynch's Bryan Spillane maintained a Buy rating with an unchanged $221 price target.

BMO: 'More Confidence' In Bull Thesis

Constellation's first-quarter report should give investors "more confidence" in the bull thesis, Sharma said in a Monday note. 

The print also supports an outlook of at least a high-single digit core EPS growth through 2022 for three reasons, the analyst said:

Despite cold weather, the company still saw 6.6% beer depletion (sales-to-retailers) growth from increased marketing in Premier and a revival in Corona.

Power Brands saw 4.2% depletion growth, which reaffirms an "attractive picture" of the revived wine portfolio.

Constellation's core EPS guidance range of $8.65-$8.50 looks conservative given solid volume and pricing leverage, productivity benefits and favorable foreign exchange trends.

Jefferies: Conference Call Takeaways

Investor concern heading into Constellation's report may have been unfounded, as the company reported a solid earnings report, including topline growth, gross margin and earnings beats, Grundy said in a Sunday note. 

During the post-earnings conference call, the company highlighted a strong start to the fiscal second quarter and specifically called out a focus "entirely around Refresca this [summer] season," the analyst said. 

Hard seltzers realized a larger component of growth in the high-end category compared to prior periods, Grundy said. 

On the other hand, management said it is "not pleased" with Canopy Growth Corp CGC's quarter but said that expectations moving forward are "mostly on track" to become a $1-billion run-rate business by the end of the next fiscal year, according to Jefferies. 

BofA: 4 'Callouts' For New Quarter

Investors should be aware of four "callouts" for the fiscal second quarter, Spillane said in a Monday note. 

They are: 

The quarter includes lapping 10% beer depletion growth last year along with one less day in the current quarter.

Marketing spend for multiple brands will remain elevated.

A shipment timing benefit will impact beer volume growth and margins.

The 18% tax rate seen in the fiscal first quarter should remain similar.

Price Action

Constellation shares were down 1.84% at $193.32 at the time of publication Monday. 

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